Finally, Making Mandatory a Register for Corporate Lobby Groups in the EU

The EU is currently negotiating a proposal for a mandatory lobby group register. Imogen Liu breaks down the proposed reforms and their implications for improved transparency and oversight.

The European Commission, Parliament, and the Council have begun negotiations for a mandatory Transparency Register for EU-affiliated lobby groups. The Council agreed on a mandate in December 2017 to join the other two institutions that are already covered under the current voluntary register. This comes as welcome news given the voluntary nature of the current register, which has generated the criticism of more than a few lobby watchdogs.

The EU Transparency Register currently operates as a provider of public information. The proposed reforms seek to extend the mandate of the register with the aim of making it a lynchpin of EU democratic and public accountability. The reforms will make mandatory the register for all three core EU institutions, standardise and enhance disclosure rules, and allow for the application of sanctions for non-compliance. These measures are designed to address several deficiencies of the current system.

A Mandatory Register

Although the register contains over 10,000 entries, research has found a substantial proportion of active Brussels-based lobby firms in key categories to be missing, amounting to 27% of companies, 24% of lobby consultancies, and a significant 41% of NGOs. Likewise the majority of law firms do not disclose on the grounds of client confidentiality, despite evidence that such impediments have not prohibited several international law firms from doing so. Also of note is the high proportion of NGOs that receive EU funding – almost half – and the potential conflicts of interest this presents. Requiring registration and financial disclosure of all NGOs, regardless of the level of EU funding they receive, will go a long away in resolving a potentially compromising situation, strengthening the accountability of EU funding mechanisms, and avoiding reputational harm for the civil society groups who play an important role in authenticating the EU’s representational claims. Successful transparency systems first and foremost require that information be made public. The mandatory register aims to enlarge the jurisdiction of transparent disclosure to capture all interest groups with which the EU engages, ensuring the breadth of public information availability.

Standardising and Enhancing Disclosure Rules

Incorrect categorisation of producer (e.g. consultancies, business-related interests and trade unions) and non-producer groups (e.g. NGOs) accounts for 15% of all register entries. Current disclosure rules are based on self-identification, but differing disclosure standards for producer and non-producer groups encourage incorrect identification. Non-producer groups are not required to disclose lobbying budgets whereas producer groups are, which creates a loophole for producer groups who do not want to disclose the details of their lobbying budgets. As one would expect, the majority of incorrectly-categorised organisations are producer groups. Similarly, non-producer groups are required to disclose the territorial spread of their membership whereas producer groups are not.

The requirements for ‘selective disclosure’ encourage agent-controlled transparency in which interest groups control the nature of information flow. Standardising disclosure requirements across categories reduces the discretionary powers of specific categories vis-a-vis other categories, closing loopholes in current standards and ensuring equal access to information for the public.

Sanctions for Non-Compliance

Another key element in successful transparency regimes is the ability to impose punishment for non-compliance. Transparency theory suggests that two mediating factors determine the effectiveness of transparency initiatives. One is publicity – guaranteeing citizen access and receipt of information. The other is accountability – ensuring the participation of interest groups through sanctions. The sector-specific and technical nature of EU legislation poses limitations for citizens’ ability to access and evaluate transparency information. The lack of a visible European press to mediate between the EU’s technocratic output and citizens, and the public’s general disinterest in EU policy-making, are factors outside EU control, at least in the short term. As such, there is even greater pressure to make up the shortfall. Sound accountability instruments can buttress the lack of public accessibility but they need to be credible deterrents; consequences need to be tough enough to alter the pay-off structure for non-compliers.

Current standards do not impose a registration requirement on all interest groups who meet with officials. Coupled with lax financial disclosure requirements, loopholes in categorisation and no sanctioning procedures, the register does not present a credible deterrent to non-compliance.

Withdrawing access through legal sanctions is necessary to significantly alter the pay-off of non-disclosure. Soft-law standards of enforcement are limited in effectiveness. In a paper co-authored by Ann-Marie Slaughter several transparency regimes, such as the Financial Action Task Force (FATF) and the Extractive Industries Transparency Initiative (EITI), were criticised for the limits of their soft-law sanctioning capabilities in preventing non-compliance. The FATF, for instance, induces participatory states to make incremental changes in order to stay off the Non-Cooperative Countries and Territories blacklist, while avoiding substantive reform.

Long Term Implications

A mandatory register will go a long way in strengthening the accountability condition required for successful transparency regimes. However, several issues that may compromise the long-term efficacy of the register must be noted.

First, publicity serves an important mediating function for transparency. Relevant audiences must have the capacity to access and evaluate the information provided by the register. The extent to which the public is capable of accessing the register on a voluntary basis is questionable. The register needs publicity and the support of the press to ensure public accessibility.

Second, the flipside of greater public access is greater organisational access. The register will not only make transparency information available to citizens, but interest groups as well. As some commentators have suggested, transparency may make corruption easier. More detailed financial disclosure requirements, and access to the who, what, and how of institutional activity gives lobbyists greater access to the market. The inclusion of the Council is imperative as a mandatory register will only furnish organisations with more know-how to channel lobbying activity through the Council via member state channels.

Third, as member state opposition to Council inclusion suggests, governments are limited in their capacity to address the network nature of capture and corruption in which businesses, civil society and individuals are all relevant actors. Several transparency regimes have already attempted to incorporate non-governmental actors via peer-accountability mechanisms and collaborative standards-setting. The EITI, for example, empowers civil society participation in setting EITI standards in the oil, gas and mining industries. The register is a top-down device, but the participation of non-governmental actors may become essential in combating the network structure of capture and corruption.

Despite these criticisms, the proposed reforms would turn what is currently a provider of public information into a more comprehensive transparency regime with sanctioning power. A mandatory register would ensure greater oversight of lobby group activity, a contribution that should be acknowledged as a significant step toward greater democratic and public accountability in the EU.

Imogen Liu is currently completing a Research Masters in Political Science and Public Administration. Her research interests cover comparative and international political economy, financial regulation and accountability. She is a co-editor of the Leiden International Review.

Photo by Bankenverband – Bundesverband deutscher Banken